To our shareholders

We would like to take this opportunity to express our sincere gratitude for your continued patronage.

For the consolidated fiscal year ended March 31, 2010, Sun Frontier Fodousan had sales of \14,469 million and reported an operating loss of \3,448 million, an ordinary loss of \3,776 million and a net loss of \3,712 million. As company president, I believe it was my slack mental focus on every aspect of our business to report a second consecutive business period of substantial losses, and I apologize deeply to all of our stakeholders. Moreover, in light of this result we have decided to forgo a dividend for the fiscal year, a result for which I must repeatedly apologize.

During the past year, the Sun Frontier Fudousan Group strove to bolster its financial position and return to profitability by (1) decreasing interest-bearing debts and slimming down balance sheet by shrinking inventory assets, (2) establishing a stable earnings base by enhancing real estate services business, (3) lowering the break-even point by thorough cost reduction at all levels of the company and (4) strengthening capital through a third-party allotment of new shares. Although we were unable to achieve positive earnings for the full year because of losses that included a substantial valuation loss in the second quarter, by steadily implementing these measures we reported positive quarterly net income for two consecutive quarters in the third and fourth quarters, and our recent operating results are showing a recovery trend. We also continued to prepare the groundwork for restarting our replanning business, while prudently watch for signs that the market had bottomed out, and in the fourth quarter signed a contract to acquire one new property, our first such purchase in about two years.

Although our operating performance over the past year has caused serious inconvenience and concern for all of our shareholders, as described above we made progress in transforming our business structure into an organization that is capable of generating earnings even as the market remains under difficult circumstances.

As our future management policy, we will work to establish a business structure that is less susceptible to market fluctuations and seek to provide, through our existing businesses, peripheral businesses and new businesses, multifaceted services that satisfy customers’ requests and focus on management to maximize customer satisfaction, by positioning building owners and tenant firms as a two-pronged major customer base. To achieve this goal we will develop the following medium to long-term strategy.
First, we will enhance quality. We will seek to provide services and products of even higher quality, to achieve satisfaction by responding to customer requests at a high level. To attain this objective we will strengthen our employee training and internal system to inculcate thinking in which our customers always have the leading role. Specifically, we will cultivate employees who possess both expertise as professionals and an attitude of hospitality that will earn customer peace of mind and trust over the long term. In addition, in order to prepare exhaustive agreements and various reports, and provide even higher quality and carefully designed services, we will take steps to expand our after-sales customer service organization and strengthen our company system to link each one-time contact to a lifelong relationship of trust.
Second, we will reinforce our management foundation. As an organization, we will focus on strengthening our customer base and management framework, and strive to establish an enterprise that is less susceptible to market fluctuations. For this purpose, we will further strengthen and expand our property management, leasing brokerage and sales brokerage services, and divisions for which stable earnings can be projected. We also will augment rental income in our building leasing business through long-term ownership of properties, and build our customer base in stock-type businesses such as our property management business and leasing guarantee business.
Third, we will create a multi-dimensional business. As a comprehensive real estate services firm specializing in the central area of Tokyo, the Sun Frontier Fudousan Group will provide various real estate services by drawing on the collective capabilities of related internal divisions that are engaged in real estate services, including leasing brokerage, sales brokerage, property management, leasing guarantees and the provision of total support for office relocations and by forming businesses flexibly by moving from points to lines, lines to surfaces, surfaces to three dimensions. In response to customers’ demands, we also will work proactively in new businesses, including expansion of our business fields. I believe these efforts will help build the foundation for our company’s core replanning business, and contribute to growth of the replanning business sector while thoroughly mitigating risk, by ensuring stable acquisition of properties and sales channels and collaboration with our business project partners.

The Sun Frontier Fudousan Group provides customer-centered high-value real estate services based on the practical use, acquisition and sale and revitalization of properties in the central area of Tokyo. We look forward to continuing to receive your unwavering support and encouragement in the future.

May 13, 2010
Tomoaki Horiguchi, President & Chief Executive Officer